Wall Street hits a record high, lifting sentiment in Asian sharemarkets

Wednesday, 14 April 2021

Positive sentiment on Wall Street helped lift sharemarkets in Asia.

The sharemarket gained, along with other markets in Asia, after Wall Street hit a record high following an uptick in United States inflation.

The benchmark S&P/NZX 50 Index rose 0.8 per cent, or 94.96 points, to 12,751.38 on Wednesday.

Markets in Shanghai, Hong Kong, Seoul and Sydney rose, while Tokyo was off less than 0.5 per cent.

“There’s general positivity throughout the Asia Pacific region which usually rubs off on us,” said Dan Stratful, an investment adviser at Forsyth Barr.

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On Wall Street, the benchmark S&P 500 index closed 0.3 per cent higher. Consumer prices in the US increased by a stronger-than-expected 0.6 per cent in March, the fastest rate since 2012. Higher inflation normally fuels fears interest rates might be raised to keep prices stable, but the Federal Reserve has said the economy will be allowed to “run hot” to ensure a recovery is in place.

Clean energy companies Meridian and Contact have been volatile after global investors took a shine to the industry.

In New Zealand, the Reserve Bank kept Official Cash Rate at 0.25 per cent after its latest review of monetary policy.

Stratful said that helped buoy higher yielding stocks such utilities.

“It reminds investors that interests rates are low, and they are staying low, and they are not going anywhere so the hunt for yield returns,” he said.

The biggest stocks traded by value were Meridian Energy, Contact Energy and Spark New Zealand.

Meridian rose 4.5 per cent to $6.05, Contact gained 3.3 per cent to $7.61, while Spark advanced 0.3 per cent to $4.40.

Meridian and Contact have been volatile ahead of a looming selldown of their shares on Friday, with some investors taking advantage of dips to increase their holdings.

An estimated $1 billion of shares in the companies are expected to be sold by two overseas exchange traded funds after the market closes on Friday due to a rebalancing of a major global clean energy index created by Standard & Poor’s.

“You are getting a rally out of Contact Energy and Meridian Energy now leading up to that rebalancing,” Stratful said.

“They have fallen pretty heavily so a lot of investors have started to buy them on this dip so they are starting to go back up after being hit pretty hard,” he said.

“There’s been a bit of an arm wrestle going on. They’re going up today so that drags the index higher as well.”

Stratful said the benchmark index was still recovering from a technical correction when it was sold off 10.5 per cent in February.

– With AP